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What is Stamp Duty?

Written by Reviewed by Graham Norwood

6th Nov 2018 (Last updated on 27th Nov 2020) 9 minute read

Stamp Duty Land Tax (SDLT) is a fee paid when purchasing a home worth more than £125,000 in England and Northern Ireland. The cost of stamp duty is relative to the price of the house, with different rates for each proportion of a home’s cost. 

Homebuyers in Wales and Scotland must pay taxes similar to stamp duty, though with slightly different rates and bands.

Stamp duty was replaced by the Land Transaction Tax in Wales from 1st April 2018. The Land and Buildings Transaction Tax replaced stamp duty in Scotland from 1st April 2015. All of these different taxes follow a similar blueprint, with a set rate between each price band.

In this guide, Compare My Move explains all you need to know about Stamp Duty, including the cost, when the conveyancers will pay it, and how it differs in each country across the UK. Read on for advice about relief for first time buyers, and additional costs of second home owners.

This article will cover the following:
  1. Stamp Duty Covid-19 Update
  2. How Much is Stamp Duty?
  3. Stamp Duty for Second Homes
  4. How to Get a Stamp Duty Refund
  5. Stamp Duty in Wales - Land Transaction Tax
  6. Stamp Duty in Scotland - Land and Buildings Transaction Tax
  7. When Do You Pay Stamp Duty?
  8. Do First-Time Buyers Pay Stamp Duty?
  9. Can You Get First-Time Buyer Relief on a Buy-to-Let Property?
  10. Do You Have to Pay Stamp Duty When Purchasing a Shared Ownership Home?
  11. Can You Use A Help-to-Buy ISA Bonus to Pay Stamp Duty?
  12. Final Step of Buying Process

Stamp Duty Covid-19 Update

Stamp duty has been scrapped on all homes in England under £500,000 with immediate effect until March 2021. As part of the chancellor’s emergency mini-budget, Rishi Sunak announced on July 8th 2020 that by increasing the stamp duty threshold from £125,000 to £500,000, the average home buyer can save £4,500. 

The move to get rid of stamp duty charges in England will help the housing market during the Covid-19 outbreak and is expected to be in place until 31st March 2021. In Scotland, stamp duty will be scrapped on all homes under £250,000 until 31st March 2021. In Wales, Land Transaction Tax will also be scrapped on homes priced under £250,000.

These are the new stamp duty rates in England and Northern Ireland, valid from 8th July 2020 until 31st March 2021:

Portion of House PriceStamp Duty Rate

Up to £500,000 

0%

£500,001 to £925,000

5%

£925,001 to £1.5 million

10%

£1.5 million+

12%

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How Much is Stamp Duty?

The amount of Stamp Duty Land Tax you’ll have to pay is relative to your house price and country within the UK. It’s based on a series of tax bands on different portions of your total house price. It's important you remember to factor stamp duty into the total cost of buying a house

As an example, we’ll imagine you’re a homeowner buying a house for £300,000. The first £125,000 of this house has a 0% rate, meaning you pay no stamp duty on that first portion. The next tax band is 2% between £125,001 and £250,000, meaning you pay £2,500 on this portion of the total house price. The next tax band is 5% between £250,001 and £925,000, so you’ll pay £2,500 on the final £50,000 of your total house price.

So, when purchasing a £300,000 house, a homebuyer will pay £5,000 in stamp duty.

Let’s take a look at the cost different Stamp Duty Tax Rates below.

Stamp Duty Tax Rates

Portion of House PriceStamp Duty Rate
Up to £125,000 0%
£125,001 to £250,0002%
£250,001 to £925,0005%
£925,001 to £1.5 million10%
£1.5 million+12%

For a quick way to work out your stamp duty, use our Stamp Duty Calculator to figure out the amount of stamp duty you will need to pay.

Who Doesn't Pay Stamp Duty?

You won't have to pay any stamp duty if your property costs less than the threshold of £125,000. However, the good news is that there are situations where you'll be exempt from paying stamp duty.

Exemptions include:

  • If you're transferring the ownership of a property and no payment is made.
  • If a property is left to you in a will.
  • If the property is transferred as a result of a divorce or the dissolving of a civil partnership.
  • If you're eligible for first-time buyer's relief

Stamp Duty for Second Homes

As of April 1st 2016, homebuyers pay an extra 3% on any second homes or buy-to-let properties above £40,000. This additional tax does not apply to caravans, mobile homes or houseboats.

This higher rate is calculated by adding 3% to every band of the normal stamp duty rates. For example, if you purchased a £300,000 second home you'd pay £14,000 in stamp duty.

As an additional property, the first £125,000 of this house now has a 3% rate, meaning you'll pay £3,750 on that first portion. The next tax band is now 5% between £125,001 and £250,000, meaning you pay £6,250 on this portion of the total house price. The next tax band is now 8% between £250,001 and £925,000, so you’ll pay £4,000 on the final £50,000 of your total house price. So in total, a £14,000 Stamp Duty bill.

Find the stamp duty rates for your second home below.

Second Home Stamp Duty Rates

Portion of House PriceHigher Stamp Duty Rate
Up to £125,000 3%
£125,001 to £250,0005%
£250,001 to £925,0008%
£925,001 to £1.5 million13%
£1.5 million+15%

Currently, this 3% surcharge for second homes is also added to house purchases in Wales and Scotland in their devolved stamp duty systems.

How to Get a Stamp Duty Refund

The 3% stamp duty surcharge for additional properties may apply when you buy a new home but the sale of your current home is delayed. This technically means you will temporarily own two properties, causing you to pay the 3% extra for owning a second home.

Luckily, you'll be able to apply for a refund for this higher rate of stamp duty if you sell your previous main property within three years. You'll need to file for your refund within three months of selling or within a year of filling out your self-assessment tax return.

To apply for the refund, you'll need:

  • Details of the property.
  • The date of purchase.
  • The reference number for the stamp duty transaction.
  • The amount of stamp duty tax you paid, and an amount for repayment.

You can get more information and download the request form here, and apply for a refund online or via post.

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Stamp Duty in Wales - Land Transaction Tax

Stamp duty was replaced in Wales by the Land Transaction Tax on 1st April 2018 This new duty follows a similar process of different taxation rates for different portions of house price. Much like stamp duty, 3% is added to each bracket for second homeowners or buy to let. The main difference is the 0% rate applies to houses up to £180,000 in Wales, compared to the £125,000 0% for stamp duty.

Through our calculations, the average homebuyer in Wales is better off by £560 from the changes. The bill for Land Transaction Tax is either less or equal to stamp duty costs up until £402,000. At this point Wales' Land Transaction Tax becomes the more expensive duty. For a full rundown for what this change means and how it compares with stamp duty, read our guide to the Wales Land Transaction Tax.

Check out the different rates below.

Land Transaction Tax Rates

Portion of House PriceLand Transaction Tax RateAdditional Property Rate
Up to £180,0000%3%
£180,001 to £250,0003.5%6.5%
£250,001 to £250,0005%8%
£400,001 to £750,0007.5%10.5%
£750,001 to £1.5 million10%13%
£1.5 million+12%15%

Home buyers in Wales can use our cost of moving house calculator to get a rundown of the Land Transaction Tax costs for their move.

Stamp Duty in Scotland - Land and Buildings Transaction Tax

Stamp duty was replaced by the Land and Buildings Transaction Tax (LBTT) from 1st April 2015. This duty follows a similar blueprint to stamp duty, with different taxation rates for different brackets of house price. Like stamp duty, second homeowners will be charged an extra 3% on every band.

First-time buyers in Scotland won't enjoy the same £300,000 Stamp Duty relief as in England, but will likely dodge LBTT thanks to recent changes. For first-time buyers in Scotland, the threshold for LBTT rates have been increased from £145,000 to £175,000. This means that any first-time buyer in Scotland will pay no duty on houses up to £175,000. This relief was introduced in June 2018.

For a full rundown of LBTT rates, see the table below.

Land and Buildings Transaction Tax Rates

Portion of House PriceLBTT RateLBTT Additional Property Rate
Up to £145,0000%3%
£145,001 to £250,0002%5%
£250,001 to £325,0005%8%
£325,001 to £750,00010%13%
£750,001+12%15%

Movers in Scotland can use our cost of moving house calculator to get full LBTT costs on their house purchase.

When Do You Pay Stamp Duty?

Your licensed conveyancer will most likely deal with the stamp duty return and payment for you. However, it's still something you can do yourself. Either way, it is your responsibility to ensure stamp duty is paid on time.

You may be subject to penalties and added interest if you do not pay your SDLT within 30 days of buying your new property.

All forms that need to be filled out can be done so online or over the phone if required. To find out more about completing Stamp Duty Land Tax forms, visit the GOV.UK website.

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Do First-Time Buyers Pay Stamp Duty?

Due to ‘first-time buyer relief’, first-time buyers do not have to pay stamp duty on certain properties throughout the majority of the UK. 

First-time buyer relief, also known as first-time buyer stamp duty exemption, was first introduced in November 2017. Since its introduction, there have been over 464,700 claims for first-time buyer relief in the UK. According to HM Revenue & Customs, this means that the total amount relieved since it began is currently over £1.1 billion.

If you’re a first-time buyer in England or Northern Ireland, you won’t have to pay stamp duty on properties worth up to £300,000. For those living in Scotland, it’s for properties worth up to £175,000. 

There is no relief from Land Transaction Tax for first-time buyers in Wales. However, you’re only liable to pay LTT when you buy a residential property that costs more than £180,000.

What is Classed as a First-Time Buyer?

To be a first-time buyer, you must never have owned a residential property in the UK or abroad. First-time buyers will not have a property to sell before buying a new one and so will be chain-free.  

If you have previously inherited a house, you will no longer be considered as a first-time buyer as you will have legally owned the property. Also, if your name is on the deeds of any property - even one you only have a share in, perhaps with a partner or a friend -you will not be considered as a first-time buyer.

Can You Get First-Time Buyer Relief on a Buy-to-Let Property?

No. First-time buyer relief is only for those buying a property that they intend to live in. You can let out other rooms within the property you’re living in and qualify for first-time buyer relief, but not when buying a buy-to-let home.

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Do You Have to Pay Stamp Duty When Purchasing a Shared Ownership Home?

Yes. You will have the option of paying the stamp duty fee either upfront or in stages.  However, if you’re a first-time buyer purchasing a shared ownership home, you will be entitled to some form of first-time buyer relief.

Can You Use A Help-to-Buy ISA Bonus to Pay Stamp Duty?

Yes. If you inform your conveyancing solicitor that you have a Help to Buy ISA, they can submit the bonus request once a completion date has been agreed upon. They will then receive the payment and deduct the cost from what you owe on the property.

Final Step of Buying Process

This article is the last of our home buying guide. Paying any Stamp Duty or Land Transaction Tax will be the last thing you do after completing. Our advice centre features a variety of useful guides to help you through the moving process. The next guide in our series is selling a house.

Zenyx Griffiths

Before Compare My Move, Zenyx once wrote lifestyle and entertainment articles for the online magazine, Society19 as well as news articles for Ffotogallery.

Graham Norwood

Reviewed by Graham Norwood

Property Journalist and Editor,

With over 15 years of experience in residential property journalism, Graham is currently the editor for both Estate Agent Today and Letting Agent Today.